GBP/USD Climbs Toward 1.3450 as UK Inflation Surges, US Dollar Weakens on Moody’s Downgrade

🔺 GBP/USD Rallies for Fourth Day Ahead of UK PMI Data

The British Pound (GBP) gained further ground against the US Dollar (USD) on Thursday, with GBP/USD trading near 1.3430 in early Asian hours. This marks the fourth consecutive day of gains, fueled by robust UK inflation data and continued weakness in the US Dollar following Moody’s downgrade of the US credit rating from Aaa to Aa1.

Moody’s now projects US federal debt to reach 134% of GDP by 2035, up from 98% in 2023, with the fiscal deficit widening to 9%. This deterioration is largely driven by increasing debt servicing costs, expanding entitlement programs, and reduced tax intake.

⚠️ US Dollar Under Pressure as Confidence Wavers

The US Dollar continues to face downward pressure, not only due to the downgrade but also because of dimming consumer and corporate sentiment. Speaking at a panel event, Cleveland Fed President Beth Hammack and San Francisco Fed President Mary Daly voiced concern about the economic outlook. While acknowledging the strength of headline data, both officials blamed recent shifts in trade policy for growing unease among households and businesses.

This sentiment, combined with growing fiscal concerns, has left the Greenback vulnerable — particularly against currencies like the Pound that are backed by rising inflationary expectations.

📈 UK CPI Data Surprises to the Upside, Boosting Sterling

The UK Office for National Statistics reported a significant rise in April Consumer Price Index (CPI) data, exceeding market expectations:

Annual CPI: 3.5% (vs. 3.3% forecast, 2.6% previous) – highest since Nov 2023
Monthly CPI: 1.2% (vs. 1.1% forecast, 0.3% previous)

This robust inflation print has reduced the odds of further Bank of England (BoE) policy easing. In fact, it strengthens the case for maintaining a tighter monetary stance, which is supportive of the Pound in the near term.

📊 GBP/USD Technical Snapshot

Indicator	Value
Current Price	1.3430
Key Resistance	1.3450 → 1.3500 → 1.3560
Immediate Support	1.3340 → 1.3300 → 1.3250

The recent bullish momentum places GBP/USD just shy of the 2025 high at 1.3445. A decisive break above this level could target the 1.3500 handle, with further upside potential if upcoming UK data remains strong.

🔍 What’s Next? Eyes on UK PMI Data

Traders now turn their attention to the upcoming S&P Global PMI release scheduled for Thursday. A positive reading could reinforce the Pound’s uptrend and drive GBP/USD toward fresh yearly highs.

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Yasher Rizwan